A Brief Review Of Data Localisation In India
Post on 01,August 2019   9:00 PM
By - Miss. Vibha Yadav
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In a circular in April 2018, RBI had said that all payment system providers shall ensure that the entire data relating to payment systems operated by them are stored in a system only in India.Data localization is a concept that the personal data of a country’s residents should be processed and stored in that country.  There can be provision of conditional sharing of data or no sharing at all depends on country.

Background: Srikrishna committee report
  • At least one copy of all personal data will need to be stored on servers located within India.
  • Critical personal data will only be stored and processed in India.
Data Protection Bill 2018
  • The right to privacy is a fundamental right and we need to protect it.
  • The Central Government shall notify categories of personal data as critical personal data that shall only be processed in a server or data centre located in India.
  • Establishment of a Data Protection Authority
Draft national e- commerce policy
  • Recommended data localisation and give 2 years time to industries to make changes. 
  • Process to encourage data localization and Grant infrastructure status to data centers.
RBI's localization directives
  • Applicable to payment system providers like MasterCard, Visa and different e-wallets like paytm.
  • Having end-to-end transaction detail.
  • Data processing can be done overseas but after processing, data should be deleted from the systems abroad and brought back to India within 24 hours or one business day, whichever is earlier.
The need for this move
  • Now world is witnessing new industrial revolution which is based on Artificial intelligence, Bio-technology etc and data is essential in it. Digital data of  the country continue raising at very high rate i.e. double the world average rate. if India stores all data in the country, it emerges as 2nd largest investor in the data centre market and 5th largest data centre market in the world by 2050.
  • India has 2nd highest FinTech adoption rate & data localization will accelerate the domestic production of high technology products resulting in the massive job creation in the field.
  • This process of localization will increase the physical presence of MNCs in India resulting in more jobs, increase their tax liabilities and provide level playing field for domestic companies.
  • The government get access to huge country data collected by companies which will act as input to the policies making.
  • Through data localization, all the country data come under the purview of regulation bodies which will help in maintaining data sovereignty and privacy.
  • Enhance national security by providing the access of data to law enforcement authorities.
Problems associated with the realization of objectives
  • Data localization could affect innovation and ease of doing business in India which would probably result in crowding out of FDI.
  • India's Business Process Outsourcing (BPO) and Information technology enabled services (ITeS) industries are depending on cross border data flows and  will face one additional problem of cost along with other technological challenges like machine learning, AI etc. 
  • According to Symantec's Internet Security Thread Report 2017, India is 3rd most vulnerable country in terms of risk of cyber threats due to inadequate cyber security infrastructure.
  •  Law enforcement agencies continue unable to access encrypted data.
  • There may be possibility of state surveillance and misuse of personal data.
  • Possibility of protectionism environment in global trade through increasing demand of data localization by other countries.
Final Remark: The government should focus on creating enabling environment by providing required physical infrastructure, giving data centres the status of infrastructure, enactment of cyber security law for the protection of privacy of citizens etc. this may be a good move towards economic development of the country but security of data is essential and government should focus on enhancing cyber security norms.


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